The recent fluctuations in the stock market have cast a shadow over sectors that were anticipated to thrive under President Donald Trump's policies. Postelection gains have dwindled, with the S & P 500 index showing a 3.5% increase since November 5 but now in negative territory since his inauguration on January 20. The Russell 2000 small cap index, initially expected to benefit from lower regulation and taxes, has also dipped since Election Day. Sectors like industrials and materials, once considered popular "Trump trades," have struggled to maintain momentum. Funds tracking these sectors, such as the Industrial Select Sector SPDR Fund (XLI) and the Materials Select Sector SPDR Fund (XLB), are also facing declines post-election. The Energy Select Sector SPDR Fund (XLE) has shown minimal gains since Election Day, despite Trump's pro-fossil fuel stance.Financials, however, have managed to retain some gains, with the Financial Select Sector SPDR Fund (XLF) up by 9% since the election. Nevertheless, this fund is poised for a negative February performance. On a different note, the cryptocurrency market, particularly Bitcoin, has lost momentum, dropping below $90,000 after reaching $100,000 in December. This decline is attributed to uncertainties surrounding Trump's tariff policies and signs of economic slowdown.Investors are expressing concerns about potential policy missteps from the Trump administration, as indicated by Jason Draho, UBS head of asset allocation and CIO for the Americas. While the probability of market-friendly policies was initially high, worries about adverse policies are growing due to recent actions and data. This uncertainty is expected to fuel market volatility in the short term. Despite these challenges, the U.S. stock market remains close to record highs. Moreover, global markets in China and Europe have shown strength, posing a new challenge to U.S. equities that have enjoyed years of global flow support. As Raymond James strategist Tavis McCourt notes, this shift signifies a global trend that could impact U.S. equities that have long benefited from favorable global flows.
